Despite an already strong run, Rockwell Medical, Inc. (NASDAQ:RMTI) shares have been powering on, with a gain of 27% in the last thirty days. Looking further back, the 17% rise over the last twelve months isn't too bad notwithstanding the strength over the last 30 days.

Even after such a large jump in price, Rockwell Medical may still be sending very bullish signals at the moment with its price-to-sales (or "P/S") ratio of 0.8x, since almost half of all companies in the Medical Equipment industry in the United States have P/S ratios greater than 3.1x and even P/S higher than 7x are not unusual. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so limited.

How Has Rockwell Medical Performed Recently?

With revenue growth that's superior to most other companies of late, Rockwell Medical has been doing relatively well. Perhaps the market is expecting future revenue performance to dive, which has kept the P/S suppressed. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

Do Revenue Forecasts Match The Low P/S Ratio?

Rockwell Medical's P/S ratio would be typical for a company that's expected to deliver very poor growth or even falling revenue, and importantly, perform much worse than the industry.

If we review the last year of revenue growth, the company posted a terrific increase of 25%. The latest three year period has also seen an excellent 55% overall rise in revenue, aided by its short-term performance. So we can start by confirming that the company has done a great job of growing revenue over that time.

Looking ahead now, revenue is anticipated to climb by 11% during the coming year according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to expand by 9.2%, which is not materially different.

With this information, we find it odd that Rockwell Medical is trading at a P/S lower than the industry. It may be that most investors are not convinced the company can achieve future growth expectations.

What We Can Learn From Rockwell Medical's P/S?

Shares in Rockwell Medical have risen appreciably however, its P/S is still subdued. Typically, we'd caution against reading too much into price-to-sales ratios when settling on investment decisions, though it can reveal plenty about what other market participants think about the company.

Our examination of Rockwell Medical's revealed that its P/S remains low despite analyst forecasts of revenue growth matching the wider industry. When we see middle-of-the-road revenue growth like this, we assume it must be the potential risks that are what is placing pressure on the P/S ratio. Perhaps investors are concerned that the company could underperform against the forecasts over the near term.

Before you settle on your opinion, we've discovered 2 warning signs for Rockwell Medical that you should be aware of.

If you're unsure about the strength of Rockwell Medical's business, why not explore our interactive list of stocks with solid business fundamentals for some other companies you may have missed.

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